Use the download method if you have issue upgrading to OS X Lion 10.7.4 using Software Update

You might encounter error when you try to upgrade from lower version of OS X Lion to latest 10.7.4 using Software Update. This is especially true if you’re upgrading not from the last version (OS X Lion 10.7.3) with the OS X Lion Update Combined. The error The update ‘Mac OS X Update Combined” can’t be saved persists even if you keep trying.

The solution is to download the OS X Lion Update 10.7.4 (Client Combo) from Apple website instead of updating via Software Update. Run the update package after the download to update OS X Lion to 10.7.4.